Housing Good News

Here’s a piece of good news about the foreclosure mess and the overall bad housing market. Good news in this arena is as rare as snowmen in the summer, so I wanted to pass it along right away.

An acquaintance called me some days ago to tell me he successfully got his mortgage company to renegotiate his mortgage loan terms.  Woot! Woot!

The Original Mortgage

• Taken out in 2003
• 5 year ARM, Interest Only payments at 5.875%
• Payments of 882.32 per month (interest only, not touching principle)

The New Mortgage

• 3.875% fixed rate for 40 years
• about $400 payment needed to start the new plan

This is phenomenal news! On your average $200,000 mortgage, this renegotiation brings the payment down from about $1183/month to $820/month.

Congratulations Tom!

The homeowner in this case had suffered both a medical disability and a job loss. Both these events are typically “qualifying events” for almost every mortgage company. Experiencing a qualifying event means you’re eligible for the mortgage company’s renegotiation plans.

Haven’t had a job loss or medical disability? It’s still worth contacting your lender if you’re struggling to make the current payment, or if you know you soon will struggle when the adustable rate (ARM) adjusts in the future.

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Further good news on the credit card front –

Another friend of mine fell 2 months behind on credit card payments. He had a 5 to 15 year good payment history on the various cards. He’s 100% commission in a profession related to the housing industry, so times are tight.

Bank of America contacted him and offered their “Hardship Program” –

Old Payments

• Card 1 — $382.00 per month at 28.99%, payoff time about 40 years
• Card 2 — $213.00 per month at 15.22%, same

New Payments under B of A’s “Hardship Program”

• Card 1 — $200 per month at 4.75%, payoff time 60 months
• Card 2 — $168 per month at 4.50%, same

If you’re falling behind on or struggling to pay any of your consumer debt, call the servicing company today! They’re as scared of the word “recession” as we all are, and they’re agreeing to reduced payment plans to avoid writing off the bad debt entirely.

I Can’t Pay the Mortgage, Part 2

This is a continuation of a recent post on this topic, and a followup to a post many months ago about what to do if you get a Notice of Trustee’s Sale.

Remember from Part 1 of this series that (1) I’m not an attorney and I’m not giving legal advice, (2) you don’t need to pay someone to help you out if you’re struggling to pay the mortgage, (3) there are many reputable organizations that offer help to homeowners who can’t pay their mortgage, and (4) a Notice of Trustee’s Sale is not a foreclosure action in and of itself but will result in a foreclosure if the homeowner doesn’t do something within 90 days of receiving the Notice in the mail. Read Part 1.

There are a couple of other things that you can do; these are items I tell folks who call me to talk about their options when they can’t make the mortgage payment.

1. Approach your lender about a workout plan, a forbearance program, or a repayment plan. “Workout plan” is a generic description of the process of changing the terms of your mortgage. Forbearance allows homeowners to temporarily stop paying the mortgage and catch up later. Repayment plans typically involve sending in your monthly payment with an extra payment to catch up on missed past payments. See also number 3 below.

But realize that these are options best suited for folks with a temporary inability to pay the mortgage. If you’ve been sick, been in an accident, been laid off, or have experienced some other situation such that you can’t pay the mortgage now but (realistically) expect to catch up in the next 6 to 12 months, these options might work for you. See definitions on the HUD site, in the right hand sidebar.

2. If you’re in the military, know that there are special programs for you. Tell your lender about your service details and ask for their help.

3. Ask for a loan modification. This is when the lender and homeowner agree to change the terms of the original mortgage. Maybe the bank will write down some of your principal. Maybe they’ll extend the payoff timeline. Maybe they’ll lower the interest rate. You should definitely consult a real estate attorney and maybe even a financial planner if you’re considering these options and get to the stage of looking at documents from your lender. Note that many lenders still aren’t offering meaningful help: NewsDay recently reported that 8 out of 10 homeowners who requested lender help with their mortgage arrangements weren’t getting it. Don’t let that stop you from asking though. A very wise person I know often reminds me, “You never get anything if you don’t ask.” Hat tip SJN.

4. Get the rest of your financial house in order. Banks do not like accepting short sales. They lose a lot of money and in return, they ding your credit but hard.  If you need to refinance anything (car, student loan, etc), do it now. If your old car won’t make it another 2 to 4 years, consider buying another now. After the short sale is over, you’ll be living a cash-only lifestyle for several years. Much of your immediate future will be a case of if you can’t pay for it in cash, you can’t buy it.

5. Consult a credit counseling service. Many homeowners struggling with mortgage payments are also over extended on credit cards. A reputable credit counseling service can help you consolidate your credit card debt, negotiate for lower payments or lower interest rates or both. Reputable credit counseling services do not charge an up-front fee for their services although they may charge a small monthly processing fee. Most are non-profit or not-for-profit entities. If you’re having trouble paying your mortgage and/or credit card bills, there’s no doubt you’re in a rough spot in your life.  A good credit counselor will help you draft a responsible monthly budget that you can realistically stick to over the long haul.

6. Continue paying your HOA dues whenever possible. This one is not really required by law or even by lending standards. But it’s just a good karma sort of thing to do. HOAs are usually left holding a lot of bad debt when homeowners default on their mortgages. Sometimes it’s several hundreds of dollars, sometimes it can be thousands. Your neighborhood’s budget needs for pool care, landscaping, capital improvements, staff salaries and the like don’t decrease over the years. If you’ve moved out of the home and left it vacant, your neighbors’ cost to maintain your home might actually increase. Don’t stiff your neighbors if you can possibly avoid it.

7. Make sure you’ve got a good shot at getting the short sale approved. You can do this by gathering the documents noted below, and using them to prove that you can’t continue paying the mortgage. Banks will not approve a short sale just because you don’t want to continue paying the mortgage. You must prove the payments are beyond your means. You’ll need these docs to request help from your lender:

• At least 2 years’ of completed tax returns
• A couple of month’s worth of bank statements
• At least a month of paycheck stubs
• The amount of your monthly income including wages, tips, interest income, stock dividends, and alimony payments
• A list of any other assets such as 401k’s, IRA’s and cash left in any other bank accounts
• A complete list of your monthly bills
• The amount spent monthly for medicine and medical insurance payments
• Foreclosure Notice or Notice of Trustee’s Sale if applicable
• Letter to lender explaining the reason you can’t afford the mortgage
• It’s a great idea to have an attorney and/or accountant help you with this stuff. The bank(s) who hold your mortgage(s) have attorneys on staff to protect their interests. You should too. Need a referral? Call or email me.

8. You can try to sell your home before the foreclosure takes place. Often this results in a “short sale” because today’s sale price won’t completely payoff your mortgage. Short sales are time consuming and lots of work but can buy you another 6 to 8 months to live in the home while you try to sell. Recently I had a successful short sale that took 13 months from list date to closing date.  Short sales are ugly but the one silver lining is you’ll have several months when you’re not paying the mortgage and can use that money to get the rest of your finances in order.

This isn’t a good time to go For Sale By Owner by the way. If your lender eventually agrees to a short sale, they’ll also agree to a Realtor’s commission for the work involved in selling. If you put your home up for sale, interview several Realtors before choosing one. Ask about their recent statistics with short sales. How many short sales listed? How many closed successfully? How long did each take? Were those sellers’ situations similar to yours? The Realtors can’t reveal other clients’ confidential finances but they can indicate whether you are like the other successful short sale owners they’ve worked with. I can’t tell you the “right” answers to these questions. But I can assure you that successfully closing 2 or 3 short sales is better than listing 50 but not closing any. That’s just common sense, of course!

I hope these points have been helpful if you’re having trouble paying your mortgage. Again, I’m going to stress that I’m not an attorney and this is not legal advice. Please don’t take these two articles as a recipe for a do-it-yourself fix. You’re almost certainly going to need professionals to help you – these might include an attorney, a CPA/accountant or financial planner, and/or a Realtor. Not being able to pay your mortgage can be an extraordinarily stressful time; you might find that talking with a therapist or your pastor/priest/rabbi helps too.

Please call or email me if you’d like to talk about your situation.

Related Posts

1. I Got A Notice of Trustee’s Sale, Now What?
2. I Can’t Pay the Mortgage, Part 1
3. REO, short sale, lender-owned, foreclosure – what do they all mean?

I Can’t Pay the Mortgage, Help!

If you’re facing troubles paying your mortgage, act quickly. Don’t wait. Don’t hope it goes away. Don’t avoid your lender’s collection phone calls and letters. The bad news is you’re in a pickle and it’ll take some work and sacrifice to get out. The good news is that since so many Americans are in the same (leaking) boat with you, there are an ever-growing number of programs and plans to help you.

One of the most important things to know is that you do not need to pay anyone to help you out of your financial distress. Anyone who asks for an up-front fee is probably a scam artist.

Similarly, I personally am very skeptical of foreclosure “experts” who have slick marketing materials and a professional sounding plan, and want you to start by signing  a transfer deed changing ownership of the home to them. If you transfer ownership of your home by signing a Deed of any kind, you do not transfer responsibility for paying the mortgage. Essentially it’s like giving away your car and agreeing to continue making the car payments. Not a great idea. If a foreclosure expert approaches you with a “program” that includes signing a transfer deed, warranty deed, or quit claim deed as the first step, call an attorney for advice. Fast.

The second important thing to know is that I am not an attorney. I am not giving legal advice. I’m jotting down some of the advice I give my own clients, after hearing about their entire situation and after I tell them to consult a tax professional and an attorney. Please do not consider the advice below as perfect for your situation. Consult an attorney, a knowledgeable Realtor, and your tax preparer.

Now some resources.

• You can check out Hope Now
• Get HUD’s list of ways to avoid foreclosure
• Or check out HUD’s list of Do’s and Don’ts for facing foreclosure or HUD’s list of helpful companies and nonprofits
• The Neighborhood Assistance Corp of America is a 20-year old, Boston-based nonprofit with $10 billion in funding from Bank of America to help homeowners refinance into more affordable loans

Next up, understand the timing related to a Notice of Trustee’s Sale (this applies only in metro Phoenix where I work). The Notice is simply a formal letter to you, from your lender stating that they know you’re behind on your payments, and if you do nothing they will sell your house at a foreclosure auction in 90 days. That’s 90 calendar days, not 90 business days.

A Notice of Trustee’s Sale is not a foreclosure; you still own your home. You can try to work with your mortgage lender to create a payment plan you can afford. You can try to sell your home before the foreclosure happens. You can hire a Realtor or a foreclosure expert to help you with these actions.

Whoever you choose to work with, check them out! Distressed markets like we’re in create room for a lot of really sleazy, smarmy people to scam innocent folks. Ask for references and call those references.

If you choose to work with a Realtor or a foreclosure expert, call their prior clients. Ask those folks how recently the Realtor helped them, what happened, and whether they were happy with the work done for them. Ask them if there was anything they were unhappy about too. If you choose to work with a company, check them out with the Better Business Bureau and/or the local Chamber of Commerce. You can see a list of various state’s Chambers here.

This is a list of online spots you can trust to give you free, unbiased and scam-less information:

• Fannie Mae
• Freddie Mac (don’t let the recent “government takeover” news scare you off. There’s a new set of faces in upper management at each company, but they’re still doing business)

• Home Loan Learning Center
• Home Ownership Preservation Foundation
• Neighbor Works America

Of course, if you’re ready to list your house for sale as a short sale, feel free to call me. I’ve successfully sold several short sales this year, and helped a few buyers make offers on short sales too. My goal and daily practice is providing pressure-free truthful information. If I can help you, I’ll say so and tell you about my commission fee structure right at the beginning. If I can’t help you, I’ll tell you that honestly too, and help you find someone who can get you out of your pickle. You can start getting to know me better online by reading this series of articles I wrote for buyers considering short sales.

More info soon in Part 2, including getting a loan modification, a workout, and/or listing your home for sale as a Short Sale.

Related Posts

1. I Can’t Pay the Mortgage, Part 2
2. I Got a Notice of Trustee’s Sale, Now What?
3. REO, short sale, foreclosure – What Do They All Mean?
4. I’m Quoted In USA Today Talking About Foreclosures

How to Buy Short Sale Homes, PART 4

This is the 4th in a series about buying metro Phoenix area short sales homes.

Photo credit to I Can Has Cheezburger

Many, many potential buyers in the Phoenix market lately want to look at “short sales”, “foreclosures” or “bank owned homes”. Often they’re not quite sure what these terms mean exactly, but they know the 10 o’clock news (or their brother’s cousin’s baker’s tailor) says short sales are a spanking good deal.

See here for the differences between REOs, bank owned, short sales, foreclosures and preforeclosures. This article talks about buying short sales. Lender owned homes are a different ballgame and I’ll address those soon. But regardless of type, the secret to buying one of these homes is organization combined with an open mind and a lot of patience.

ORGANIZATION – Getting the Deal Closed
Now you’ve got an accepted offer on the short sale or lender owned home of your dreams, what about closing the deal? Banks usually want you to close within 30 days of their acceptance. Sometimes they take their sweet time sending you the acceptance, thereby eating up some of your 30 days and some of your inspection period.

Get cracking! Are you working with a full time, professional Realtor who’s ‘got people’ and can get a home inspection, roof inspection, A/C inspection and mold inspection done inside of 4 business days if necessary? You’ve got no worries. Working with your sister in law’s cousin who does real estate on the side? Or working without a Realtor? You’ve got a challenge on your hands. Whatever you do, don’t miss the deadline for the end of the inspection period.

Most banks will do no repairs. Even if the pool is green and the front porch is falling off, you’re buying it as is. Over Fourth of July weekend I spoke with a loan processor who told me she had personally done a loan for a Buyer purchasing a short sale from HSBC bank. They’d done a bunch of repairs before the closing, and even did some repairs the Buyer didn’t specifically request. This is exceptionally rare. Inspect it till you drop and expect it to be as-is on closing day.

Most banks also make you sign an addendum that removes most of the Buyer protections in the contract, institutes some additional Seller (bank) protections, and generally tilts the contract heavily in their favor.

If you’re paying cash, you should know that your purchase funds must be immediately available on the closing day. Cashier’s checks are acceptable. Wire transfers in US funds are acceptable. Canadian funds and checks drawn on Canadian banks are not acceptable. We don’t discriminate against Canadians per se, because generally no foreign funds are acceptable.

Be aware that due to the USA Patriot Act and other federal regulations since September 11th, wire transfers take a long time to transit the federal wire system. I’ve seen wires take 8+ hours. Plan on having your wired funds arrive at the title office the day before closing. Expect a wire fee of about $25 to $75. Expect a currency exchange fee of about $15, if you’re using foreign currency. I’ve been told by a very trusted and experienced title officer that she can’t get anyone to tell her who collects that $15 fee and she has never had success at making that fee disappear.

Almost every bank imposes daily late fees if the Buyer holds up the closing. These are usually in the area of $100 per day. Getting a loan to buy the home? Make sure your lender has the loan documents at the title office at least a week or two in advance of the closing date. No sense taking chances and accruing hefty late fees. if you’re out of town when the closing occurs, there will be FedEx shipping transit time to consider, so get loan docs to title early. Also, now is not the time to help your sister’s kid who’s just got in to home mortgages. Send your nephew a gift card and use a mortgage pro.

Buyer Lessons

1. Play by the bank’s rules.
2. Conduct multiple inspections
3. Make sure loan documents arrive early
4. Send wire transfers early

Related Posts:

• How to Buy Short Sales/Lender Owned Homes, Part 1
• How to Buy Short Sales/Lender Owned Homes, Part 2
• How to Buy Short Sales/Lender Owned Homes, Part 3
• I Got a Notice of Trustee’s Sale. Now What?
• Are Short Sales a Good Bargain?

How to Buy Short Sale Homes, PART 3

Photo credit to I Can Has Cheezburger

This is the 3rd in a series about buying metro Phoenix area short sale homes.

Many, many potential buyers in the Phoenix market lately want to look at “short sales”, “foreclosures” or “bank owned homes”. Often they’re not quite sure what these terms mean exactly, but they know the 10 o’clock news (or their brother’s cousin’s baker’s tailor) says short sales are a spanking good deal.

See here for the differences between REOs, bank owned, short sales, foreclosures and preforeclosures. Regardless of type, the secret to buying one of these homes is organization combined with an open mind and a lot of patience.

This article talks about buying short sales. Lender owned homes are a different ballgame and I’ll address those soon.

ORGANIZATION – Getting the Offer Accepted
Once a bank answers your offer, things start to happen fast. Very fast. Good organization can literally save a deal.

Just recently on one of my short sale listings, my Seller received multiple offers. After waiting 10 weeks for any answer, the bank gave me several answers all at once. In the space of a couple of hours, the bank’s loss mitigation rep rejected the 1st offer because it was too low, said our short sale was declined and started making keyboard clicking noises while he said, “I’m going to close this file.”

“Wait!” I shouted. “Closing the file” means (1) me and my Seller get at the end of the 10 week waiting line to have the bank’s rep look at another offer, and (2) the lender sends the Seller back to Collections and reinstitutes the threatening phone calls until Seller comes current on the mortgage.

I reminded the loss mitigation rep that we had a backup offer. He checked his file, clicked a few keys on the keyboard, and immediately accepted the 2nd offer since it was high enough to meet his lender guidelines for foreclosure deals. I still don’t know exactly who made the guidelines the loss mitigator clicked around in, but I know my Sellers are now happy campers.

Also, note that I, as Realtor, had absolutely no control over which offer was accepted by the bank. I usually like to counsel my Sellers to look at the entire package of an offer when deciding whether to accept it or not. The highest price isn’t always the best deal. A higher down payment is better than a lower one. A bigger earnest money check is better than a smaller one. Quicker closing date? Better, usually. And so on. But this one was totally out of my and the Seller’s hands.

To make matters more confusing, all this back-and-forth with the lender’s loss mitigation rep happened verbally with nothing but a letter changing hands between me and the lender. There was nothing documented in writing for the 2 waiting Buyers. The AAR Purchase Contract states very clearly that all negotiations between buyers and sellers must be in writing and verbal negotiation hold no legal water. But banks are neither buyer nor seller, strictly speaking, and don’t abide by the AAR Purchase Contract in any case.

A major factor that saved the deal for my seller client on the case noted above is that I had maintained a detailed Communications Log listing date & time, who called who, who said what, the documents exchanged, and the followup and outcome to each phone call and document submission. I knew I had sent the lender a really complete file and had the chutzpah to ask, “But we have a backup, can’t you just look at that now without any more waiting? Please? Pretty please?” His only superpower was organization, indeed!

Another short sale Buyer I encountered made a $75,000 offer on a cute little condo. The bank verbally told me (the listing agent) that they wouldn’t even look at any offers below $92,500. Often, banks won’t reply at all to offers they don’t accept. I told the potential Buyer this, but he insisted the Seller had to reply in writing to his $75,000 offer. Under normal circumstances, that’s true. But we’re still waiting 4 weeks later.

Buyer Lessons

1. Banks abide by The Golden Rule – he who has the gold, makes the rules. Don’t expect them to conform to any contract law you’re used to.

Related Posts:

• How to Buy Short Sales/Lender Owned Homes, Part 1
• How to Buy Short Sales/Lender Owned Homes, Part 2
• How to Buy Short Sales/Lender Owned Homes, Part 4
• I Got a Notice of Trustee’s Sale. Now What?
• Dirty Little Secret About Short Sales

How to Buy Short Sale Homes, PART 2

photo credit to I Can Has Cheezburger

This is the 2nd in a series of articles about buying metro Phoenix area short sale homes.

Many, many potential buyers in the Phoenix market lately want to look at “short sales”, “foreclosures” or “bank owned homes”. Often they’re not quite sure what these terms mean exactly, but they know the 10 o’clock news (or their brother’s cousin’s baker’s tailor) says short sales are a spanking good deal.

See here for the differences between REOs, bank owned, short sales, foreclosures and preforeclosures. Regardless of type, the secret to buying one of these homes is organization combined with an open mind and a lot of patience.

This article talks about buying short sales. Lender owned homes are a different ballgame and I’ll address those soon.

PATIENCE
One of my buyer clients has been waiting a little over 7 weeks for the bank to answer our offer on their short sale property. One of my sellers waited 2 full months for the bank to answer a Buyer’s offer.

This sounds absurd, right? According to the media, banks are drowning in short sales and foreclosures, making write downs and taking losses like the Titanic took on water. Why in the name of all that’s green and holy would the banks take months to answer offers?!

Sadly, this is not unusual. I’ve heard horror stories of waiting 4 to 6 months for a bank to answer an offer, even if it’s a full price offer.  The media’s right – many banks are awash in properties. But they’re simply not equipped to list and sell homes. They’re equipped to make and service loans. I hear banks are scrambling to hire & train people who can handle their backlog.

I recently had a conversation with a local agent who interviewed for a position as a loss mitigator with a lender. Sadly, the loss mitigators are paid about $30,000 a year salary, and are expected to work between 12 and 14 hours days, 5 days a week, work every other weekend, and are given 4 days of training. Almost none of them have any experience in real estate or mortgages whatsoever. Many are fresh out of college and many last no longer than their first week after training.

One of the first loss mitigators I ever spoke with (in late 2007) told me flat-out, “Honey, my desk is piled high with over 400 files just like yours. The computer shows I got your offer yesterday, but I won’t be able to look at it for at least 6 weeks. Call me then.”  She wasn’t being rude, just truthful. We’ve become phone buddies and share polite chit-chat when I call her once a week to ask (ever so politely) if she’s got to our file yet. I think she’s very nice and I think she liked me, but she still didn’t look at our file for 8 weeks.

But the loss mitigator did verify for me on Day 1 that our file was complete and had all the documents she needed including:

• Tthe Listing Agreement,
• The MLS printout,
• The Authorization for me (the Realtor) to speak with the seller’s lender,
• The Seller’s hardship letter, 2 years of tax returns, 3 months of bank statements and 2 months of paystubs,
• The foreclosure notice from local authorities,
• A letter from me to the seller about marketing activities and recent comps in the area,
• The Purchase Offer,
• The HOA Addendum,
• The Short Sale Addendum, and
• The estimated HUD-1 Settlement Statement from the title officer.

If we hadn’t put all those documents together into 1 submission packet to the lender, we’d have gone to the back of the line. The 8-week waiting period was for sellers and Realtors who got it rightthe first time. Miss a form? You’re going to wait longer.

Buyer Lessons

1. Short sales, lender owned and foreclosure properties are not for you if you must move in by a certain date.
2. Shop short sales and lender owned homes only if you are OK with lengthy periods of uncertainty.
3. It pays to hire a Realtor who’s politely persistent.
4. Make sure your document package is complete from the beginning.

Related Posts:

• How to Buy Short Sales/Lender Owned Homes, Part 1
• How to Buy Short Sales/Lender Owned Homes, Part 3
• How to Buy Short Sales/Lender Owned Homes, Part 4
• I Got a Notice of Trustee’s Sale. Now What?
• The Pitfalls of Short Sales

Buying Short Sale Homes, PART 1

photo credit to I Can Has Cheezburger

This is the 1st in a series of articles about buying metro Phoenix area short sale homes. Parts 2, 3 and 4 are coming in the next 3 days.

Many, many potential buyers in the Phoenix market lately want to look at “short sales”, “foreclosures” or “bank owned homes”. Often they’re not quite sure what these terms mean exactly, but they know the 10 o’clock news (or their brother’s cousin’s baker’s tailor) says short sales & foreclosures are a spanking good deal.

See here for the differences between REOs, bank owned, short sales, foreclosures and preforeclosures. Regardless of type, the secret to buying one of these homes is organization combined with an open mind and a lot of patience.

This article talks about buying short sales. Lender owned homes are a different ballgame and I’ll address those soon.

.

HAVE AN OPEN MIND
I showed some vacation homes to Canadian investors recently. Like all buyers, they wanted to “be in a nice neighborhood.” Found and showed them a smoking deal on a lender owned home listed at $375,000. It needed serious work. The former owners took bathroom cabinets and countertops, all appliances, and even the bathroom mirrors with them on their way out the door.

Buyers and I reviewed the sold comps together and agreed that – when refurbished – the home was probably worth about $500,000 on the open market. We also ballparked the cost of needed repairs and agreed that it would cost about $40,000 to bring the home to its former standard.

$375,000 plus $40,000 equals well below market value of $500,000.

The Buyers told me they really wanted this home. I explained that bank sales aren’t like regular private sales. We’d be dealing with a bank clerk who’d rely on internal bank regulations and an independent appraisal to determine market value. We’d also be highly unlikely to get a counteroffer. The bank would either accept our offer or never reply at all. I encouraged the Buyers to consider their highest, best offer and call me in the morning so I could draw up their offer.

Next morning, the Buyers told me to offer $341,000 (91% of list) but privately told me they’d “go a little higher.” Again I tried to remind them to give it their best shot right out of the gate. They declined, saying, “we want to see if we can get it for less first.”

Miraculously, we got a counteroffer from the bank about 3 days later. They asked for full list price of $375,000 and intimated they had multiple offers on the way into their offices. Again, the Buyers and I reviewed the recent sold comps and we all agreed the place was worth about $440,000 to $460,000 in current condition and about $500,000 post-rehab.

Buyers instructed me to counter the bank’s counter at $352,000 (or 94% of list price). Within hours, the bank said we lost the bidding war. About a month later the MLS showed the home sold to buyers who paid $363,000 (97% of list price). Ouch.

Buyer Lessons

1. Listen with an open mind.
   Discuss sold comps with your Realtor until they make sense and you agree, then take them as gospel.
2. Don’t play chicken with the bank.
   Offer your highest and best right up front. You may not get the deal but you’ll know you tried. The buyers in this example might very well have secured the home if they’d offered their highest & best of $352,000 right away, before other Buyers had a chance to make offers and the bank had a chance to pit bidding Buyers against each other.
3. Trust your Realtor.
   If s/he has comps that seem trustworthy, and you agree with her estimates of repair costs, and no other red flags about the deal appear, trust your Realtor when she advises you that full list price is still a great deal.

Related Posts:

• How to Buy Short Sales/Lender Owned Homes, Part 2
• How to Buy Short Sales/Lender Owned Homes, Part 3
• How to Buy Short Sales/Lender Owned Homes, Part 4
• I Got a Notice of Trustee’s Sale. Now What?
• Short Sales Not What They Seem

Housing Bill Not Signed

You can read and hear the story of the latest Congressional foul up over the housing bill here, on National Public Radio’s show Marketplace or over at Reuters.

• See Bloomberg’s take on the story
• And see the New York Times article yesterday for background on the bill, which has a 3-pronged plan to:

1. Help homeowners facing foreclosure by assisting them with a refinance, or getting banks to write down some loan balances,
2. Offer incentives to first time home buyers who want to buy currently vacant homes (many foreclosure properties sit vacant and risk becoming blight in the community), and
3. Implement some new regulatons on Fannie Mae and Freddie Mac, the government regulated lending behemoths

Apparently, our US Senators have not signed this bill today as originally thought and intended. Instead, they spent the day haggling over whether to add energy tax breaks to the bill. Democratic Senate Majority Leader Harry Reid wanted the bill passed today (and most sources say it would have), but Republican Senator John Ensign wouldn’t let the bill go to a vote without the addition of his pet project, $7 billion in renewable energy tax cuts.

Encouraging the use of renewable energy sources is a laudable, noble goal. But what has it to do with the foreclosure crisis? Nothing. Senator Ensign is trying to tack his tax credit bill onto the foreclosure assistance bill simply because he knows foreclosure assistance will pass, and his tax credits plan likely wouldn’t, unless it is attached to a popular, will-pass measure.

American homeowners are hurting, and badly in many places. I don’t often like to sound like I’m commenting on politics here. It isn’t the place. But this is just truly depressing news. It seems our elected officials still don’t get it. Some of them would still rather wrangle and scrap over pet projects with little chance of success than get behind a much-needed bill that was sure to pass anyway and will help tens of thousands of truly hurting Americans. 

By the time the Senate returns from the Independence Day holiday to deal with this bill again, tens of thousands more Americans will have received a foreclosure notice on their home. The bill will almost certainly pass, even with Ensign’s tack-on tax credits. For shame, Senators. I wonder which of Ensign’s ‘close friends’ and business associates stand to benefit from the $7 billion he’s going to hand out for renewable energy sources?

Related Posts on The North Phoenix Agent Blog

1. Definitions of REO, Foreclosure, Short Sale and Bank Owned
2. Mosquito Eating Fish for Green Pools?
3. Countrywide Offers Assistance to Struggling Homeowners
4. I Got a Notice of Trustee’s Sale. What Now?

Why Lenders Aren’t “In To” Fixing Foreclosures

From Inman News, I got a eblast news update that gave me a little more insight into why lenders maybe aren’t so eager to modify loan terms for homeowners facing the possibility of foreclosure.

“On mortgages carrying mortgage insurance that go to foreclosure, investors are protected up to the maximum coverage of the policy, which is usually enough to cover all or most of the loss. This discourages modifications. Why do a modification for $15,000 if the $40,000 foreclosure cost is going to be paid by the mortgage insurer?”  So says Jack Guttentag, professor emeritus of finance at The Wharton School at the University of Pennsylvania. (I found Jack’s comments at Inman.com and I think the site requires a free registration to view the article)

Unlike my last post proposing a “fix” for the foreclosure mess, I’ve got no advice or ideas on this one. I assume it’s the investors who bought the loans from the original lender who are getting payouts from the insurance funds. The bulk of today’s foreclosures are loans carrying private mortgage insurance, since many of them were exotic 80/20 and 80/15/5 loans which left homeowners with little or no equity in the property. Since the news is filled with stories of big banks announcing big losses due to their involvement in the mortgage meltdown, I guess it’s just the banks and the homeowners who are paying the price. Investors (apparently) have their losses covered by insurance.

Behind On the Mortgage? Call Lender TODAY!

I’m in a cranky mood this afternoon, because I spent a full hour on the phone with a client’s lender trying to get an agreement that will help her avoid foreclosure. (see yesterday’s entry)I call the lender to tell them that the current payment ($1461 a month) is unaffordable, and can’t we work out an agreement where the loan is re-financed for 40 years instead of 30? I explain that as the neighborhood Real Estate expert who’s sold homes just like these for the past 3 years, I’m here to say you, Mr. Lender, will lose at least $75,000 if you issue the foreclosure notice and we short sale it.  So can’t we work together to do something that results in a payment the homeowner can afford?

I’m thinking this is a reasonable plan: the lender avoids a huge write off and gets 10 years of extra interest payments, the homeowner gets to keep her home at a payment she can afford. Certainly not the lender’s first choice, but a reasonable alternative if they’re at least a little creative and progressive.

They turned me down flat. Wouldn’t even discuss it. Also wouldn’t discuss any other plan. No forbearance, no alternate arrangements, they won’t try to refinance her…. You want to hear the lender’s brilliant plan? The homeowner should send an extra $862 per month for 4 months, and then she can go back to her regular $1461 a month payment and everything will be fine. Oh, and for a limited time only, because you’re such a good customer, we’ll ding your credit rating every month with a late code on the extra-big payment.   

What the heck kind of plan is that? If she can’t afford the current $1461 a month, what makes you think she’s got $2323 a month? You think she’s going to Vegas every weekend with an additional $862 and she just “forgot” to send to you?! Sheesh!

So all’s I’m sayin’ is, if you’re even a day behind on your mortgage payment, call your lender. If you think this isn’t a once and done fluke of a situation, call. If it might be a whole month late, or if some emergency came up, or if you just can’t afford the payments… call right now. Don’t wait until you’re 3 months behind like my client did. The banks just don’t have a lot of wiggle room to negotiate another deal if you’ve left it go for months. Call today. Please.

 

Related Posts:

1. REO, Foreclosure, Short Sale – What’s the Difference?
2. I Got a Notice of Trustee’s Sale, Now What?

I Got a Notice of Trustee’s Sale. What Now?

You’re an Arizona homeowner who’s been getting behind in your mortgage payments. Today’s mail included a document entitled “Notice of Trustee’s Sale” that says the county will auction your house to the highest bidder 3 months from now.

Now what?

First, it’s crucial to remember that you still own your home. Too many people think they’ve lost the house already and give up. Don’t! There are many ways to avoid foreclosure. Consult a pro; you’ll need the expert advice. Talk to a Realtor, a CPA, your accountant, an attorney or a bankruptcy specialist. But do it quickly! Arizona’s time frame is 90 days between issuance of the Notice of Foreclosure and the actual auction.

Foreclosure Auction Sale If you do nothing, your home will be auctioned to the highest bidder 90 days after the date of the Notice of Trustee’s Sale. You’ll need to be completely out of the house within hours of the auction. You as the homeowner will have no control over this process, unless you speak with your lender(s) to convince them to stop the auction. How do you do that? Read on.

Work Out a Deal with Your Lender(s) Call your lender and ask for the workout, foreclosure, or loss mitigation department. Ask them to help you work out a new plan to repay your loan. Be prepared to explain and document your monthly income and expenses. And remember they’re recording your conversation and can use any information you give them. See the FTC website for a great simple FAQ sheet on consumer rights in debt collection situations. For temporary hardships like a lost job or illness, you might be able to get a Forbearance Agreement where you temporarily don’t pay the mortgage and catch up later. Read and understand what the lender asks you to sign, if anything. You should almost certainly consult an attorney. Remember, if you have more than 1 home loan, you’ll probably need to have this conversation with each lender.

Refinance Your Mortgage Debt If you still have decent credit, and a little equity left in your home, you might be able to refinance. Ask more than 1 lender about a refinance plan. Don’t choose your new lender only by the rate you’re quoted! The Mortgage Porter explains why.

Sell Your Home Never an easy choice, but worth considering. If you owe more on the house than a buyer will pay, you’ll have to involve your lenders and get their OK on a short sale. In a short sale, the lender agrees to accept less in payoff than you owe them. There can be serious credit consequences to a short sale, so always consult an attorney or accountant. Trust me when I tell you that you’ll need a seasoned Realtor if your home is in metro Phoenix in order to successfully short sell your house. Homes for sale are at an all time high, while the number of homes that actually sell hit a new low in September. (July 2008 update – houses are still selling slowly and the overall market stats aren’t good, but short sales seem to be about the only things that DO sell). How to find a great Realtor? Get your friends’ recommendations on Realtors. Visit their websites and blogs to narrow your list to 2 or 3. Then interview those few. Choose the Realtor your gut tells you is the best fit for you. Read my series on How to Buy a Short Sale Home for the inside scoop on how these sales happen.

Give Back Your Home In Arizona at least you can give your home back to your lender through a transaction called a Deed in Lieu. Note, this is much different than “mailing back the keys”, which is a seriously bad idea and essentially the same as doing nothing. A Deed in Lieu involves talking to your lender(s) and negotiating a deal you can both live with. This option might have less serious tax consequences than a foreclosure auction or a short sale, but it’s not a perfect process either. Laws and lender regulations are changing rapidly in this arena, so do a little online research before you decide on doing a short sale or a deed in lieu.

For some, bankruptcy is an option. For this one, you absolutely need a pro. Do a little research at www.martindale.com and ask friends & colleagues for recommendations before choosing a bankruptcy attorney. Ask the attorney if he provides a list of satisfied past clients and whether you can contact them.

And finally, consult a professional. Whether that’s a Realtor, an accountant, or an attorney, you’re going to need the help. Don’t ignore the problem, and don’t forget that you still own your home. Do something, anything to get out of this jam. If you do nothing you’ll surely lose your home. But doing some or all of these steps can help keeps you happy & snug inside your beloved abode.

Update: Arizona’s Mortgage Guru Shailesh Ghimire has a spectacular post covering a lot of the same territory I do here. And as usual, he uses fewer words and is clearer than I.

Related Posts

1. REO, Short Sale, Foreclosure – What’s the Difference?
2. I Can’t Pay the Mortgage, Part 1 and Part 2
3. Favorite lender Shailesh Ghimire of CTX Mortgage explains the credit consequences of losing your house (none of them are pretty)
4. I Am Quoted by USA Today talking about how foreclosures affect the market